The Land Where Lego Comes to Life

In the small Danish town of Billund, approximately 19 billion Lego pieces are made every year -- that's 2 million pieces each hour.

Billund is home to Lego's international headquarters. There's an international airport -- one of only two in the whole country -- built only because Lego is here. Legoland castle's ramparts dominate the skyline.

"It's part of life, it's part of daily life for the children," said Kirsten Stadelhofer, who works at the Lego museum in town. "They grow up with Lego bricks."

One in four people in Billund works for Lego. Every new employee must visit that Lego museum. Here in Billund the Lego brick is treated like a religious icon.

There's also something called an "Ideas House," where the Lego brick was invented in 1955. (By the way, they invented the wheel -- the Lego wheel -- in 1962.)

Lego, which means "play well" in Danish, was founded during the Great Depression of the 1930s by Ole Kirk Chrisatiansen, a struggling carpenter who decided to make toys to survive. He began with yo-yos and wooden ducks before moving on to wooden fire trucks and the like. Eventually the company began producing the bricks that we know today. World domination soon followed.

There are now 62 Lego bricks for every human being on this planet. There are more Lego men on Earth than there are Americans.

But in recent years, Lego, facing competition from Mattel and Hasbro, looked like it might have been left behind in the digital age.

By 2004 Lego had debts of nearly $1 billion. Christiansen's descendents, who still ran the business, saw sales slump 40 percent in just two years. Lego had lost its way.

Then, Jorgen Vik Knudsdorp, a former management consultant, was handed the reins by the family. The new CEO fired 1,000 people and streamlined production.

The company once made 13,000 different pieces; now they make only 6,000. (Most pieces, by the way, are used in multiple different models.)

Unpopular products -- many of them aimed at girls -- were discontinued. Knudsdorp sold the Legoland amusement parks to Merlin Entertainments Group, a company that he says actually knows how to run a theme park.

Knudsdorp felt that Lego had diversified too much and had lost sight of the foundation of its success: the basic Lego brick.

"When we were struggling I was thinking, jeez, I don't know whether the Lego brick is part of the future," said Vik Knudsdorp.

But, he figured, even in an age of TV and video games, kids do still want to play with their hands. To appeal to the new generation, Lego has moved away from the purer, simpler designs of yesteryear. Now, there are frequent tie-ins with video games and there are spinoffs from popular culture. There is "Star Wars" Lego, "Harry Potter" Lego and "Spongebob Squarepants" Lego, to captivate the kids.

"If you're not competitive, children will go somewhere else," says Knudsdorp. "They're quite disloyal in that sense," he added with a wry smile. "What our research tells us is that normally they will spend 15 minutes or less on any toy they get."

AFOLs: Adult Fans of Legos

Knudsdorp realized another key to Lego's success: Lego isn't just for kids. AFOLs, or Adult Fans of Lego, account for nearly 10 percent of the company's sales. On Lego-enthusiast blogs and YouTube, AFOLs gather and share their elaborate Lego sculptures, from life-sized homes to a smaller-scale Taj Mahal.

Each year there is a "BrickCon" Lego convention where lego enthusiasts from around the world come to display thier latest constructions.

"One if the first things I did as CEO was to go to one of these conventions where literally thousands of fans get together and share thier ideas," said Knudsdorp. "I spoke to these guys for three hours and what they told me was what Lego was all about, which I didnt understand ...We had lost our own way, they helped me on this journey of coming back to who we are."

The company recruits many enthusiasts to serve as ambassadors for the company and consult on new product lines.

Are Legos Recession-Proof?

After hitting rock bottom in 2004, Lego gradually began to turn a profit again. Then in 2008, as the recession deepened and toy sales in the U.S. fell on average by 5 percent, Lego sales in America actually climbed 38 percent.

"The families that buy Lego in the U.S. spend about $60 per year on Lego," Knudsdorp said. "If you could afford $60 on your child last year, even before the financial crisis, you'll still be able to afford $60 this year."

During the recession, sales are actually climbing. Laid end-to-end, the number of LEGO bricks sold in a year would reach more than five times round the world.

"One of the reasons is that parents see this as a good investment. It's not seen as the so-called wasteful society of buying something and throwing it away," Knudsdorp said.

But value for money isn't necessarily at the top of a child's list of attributes they look for in a toy. So top Lego designers like Will Thorogood are charged with dreaming up new, appealing product lines. The latest is Atlantis, which will hit stores in January.

"I was a huge Lego fan as a child, I loved Lego," Thorogood said. "When you walk into the shop for the first time and see that box that you made on the shelf in 'Toys 'R Us' of wherever you may be, you just think, 'Wow! That's amazing I did that.' And there are kids going, 'Look at that! Can I have that, Mom?'"

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